PE Panorama: Not quite so rosy

Data provider Preqin has just released a fairly celebratory report on the state of private equity in the ten-member Association of Southeast Asian Nations, or ASEAN, declaring that interest in the bloc is rising and that “venture capital in particular is booming”. To validate this, it cites a record US$900 million raised for ASEAN-focused venture capital in 2018 by 17 funds, and a further $500 million amassed between January and June 2019 by six venture capital funds.

This comes, in Preqin’s view, off the back of a new crop of venture capital-backed unicorns in the region, including Singapore’s Grab (post-money valuation $14 billion), and Indonesia’s Gojek ($9.5 billion) and Tokopedia ($7 billion). “The future seems bright for ASEAN private equity,” says Ee FaiKam, Preqin’s head of Asia research & operations.

Yet, Preqin’s own figures for ASEAN buyout and growth capital fundraising are far less rosy, at $800 million in the first six months of the year, the same as for all of 2018. Meanwhile, an official ASEAN report from last December says the grouping had a combined gross domestic product of $2.77 trillion in 2017, an increase of almost 4.5 times from $615 billion in 2000. As the report notes, this means ASEAN as a group ranks as the third largest economy in Asia, and the fifth largest in the world.

And set against that, we have a pathetic $800 million total buyout and growth fundraising for the grouping in 2018? A figure below even the venture capital fund number? Something looks very out of sync here.

Rather than waste time calculating exactly how small $800 million is as a share of $2.77 trillion, I’ll hazard a guess that these figures show that ASEAN financial markets and business culture are still far from being as mature and as uniformly developed as even its major Asian neighbours, never mind Western private equity markets.

Does such a low figure for buyout funds really suggest that Southeast Asia has an open market for corporate control? Or are the buyout fund principals prudently matching their targets to the size of the accessible opportunity, in full knowledge that state or family-connected interests keep their hands firmly on the levers of corporate power in the region?

It’s taken private equity long enough to build even slightly appropriate size to match the economies of Japan, China and India. As is so often the case, ASEAN seems to be bringing up the rear. That’s a sad reflection on the real state of a grouping that bills itself as being very open for business. Preqin’s data is more cause for irony than rejoicing.